Rosneft to lead pilot project in Bazhenov formation
In line with the strategic cooperation agreement signed in August 2011, Rosneft and ExxonMobil signed a Pilot Development Agreement to explore and produce tight oil from the Bazhenov and Achimov formation in the Western Siberia.
According to the terms of the Pilot Development Agreement, Rosneft and ExxonMobil will create a joint venture where they will share the working interests:
– Rosneft 51% is the operator
– ExxonMobil 49%
To run this pilot case at this near-commercial scale, the both partners selected the Rosneft license block 23 covering 10,000 square kilometers.
By comparison with the famous Bakken Shale gas play in the USA, the Bazhenov formation is about 80 times larger, covering 2.3 million square kilometers or 570 million acres, the equivalent of the Texas and Gulf of Mexico together.
This Bazhenov formation is known for more than 20 years but all the previous attempts to explore and develop oil and gas production fell short because of the costs and the very quick depletion of the wells.
Revised regularly upward, the Russian national subsoil agency Rosnedra estimates that the Bazhenov reserves in place could reach 182 billion barrels of oil equivalent () from which 50 billion boe should be recoverable.
The Bazhenov, Achimov and Tyumen tight oil formations are located far beneath theconventional oil formations and could represent 60% of the Russian total reserves according to Lukoil.
From the first geologists who compared the Bazhenov formation with the Bakken play in USA, they are very similar in geologic structure and liquid rich reserves, but more fragmented in Bazhenov.
Because of the large size of the formation, Bazhenov has not been totally analyzed, so that engineering services companies will have first to proceed with a complete mapping.
ExxonMobil will provide the joint venture with its:
– State-of-art technologies
– Highly experienced geologists
– Complex reservoirs specialists
– Best skilled engineers in well development and completion
– Experts in production management services
Rosneft and ExxonMobil will invest up to $300 million
During this pilot program, Rosneft and ExxonMobil are planning to perform a comprehensive drilling program combining:
– Horizontal and Vertical wells
– New wells and the expansion of existing wells or idle wells
– Geomechanical surveys
Through this Pilot Development Program, Rosneft and ExxonMobil intend to:
– Identify the blocks that could afford commercial development
– Adapt to the Bazhenov and Achimov formations the fracturing technologies imported from the USA
– Develop new methods fitting with Western Siberia highly fragmented tight oil play
– Set the best practices to maximize production
In opposition to these challenges, the Pilot Development program will benefit in Western Siberia from the existing infrastructures for the access, gas export, water supply and staff.
The recovery rates in the Bazhenof formation are pretty low, around 2 to 8%, so that ExxonMobil and Rosneft should have easy to improve these numbers in accumulating their experience to transpose the US experience in Russia.
To finance this pilot project through their joint venture, ExxonMobil and Rosneft are ready to invest up to $300 million capital expenditure.
Rosneft and ExxonMobil are planning to proceed with the first drilling of their Pilot Development Program in the Bazhenov and Achimov formations on first half 2013 in expecting the commercial exploration and production to begin in 2015.
